Last year Liz Mickens joined the growing ranks of workers who did not participate in an annual ritual that is taken for granted by much of the nation's workforce: the pay raise.
With a steep fall in sales, her employer, The Redwoods Group in Morrisville, couldn't afford to give raises. Rather than seethe with resentment, Mickens, an online technical assistant, is thankful to have a job with benefits at the local insurance company.
"I try to understand the company's point of view," Mickens said. "They're doing this because of the economy."
She may need to be equally understanding this year. Redwoods will keep salaries frozen if it doesn't make a profit again.
A whopping half of the state's workers had their wages either frozen or cut last year, and the pay situation will be similarly bleak this year, according to Capital Associated Industries, a Raleigh nonprofit that researches and lobbies on business issues.
The group surveyed nearly 400 companies last year and will issue its next wage survey this summer, but preliminary surveys done last fall suggest North Carolina companies will once again squeeze savings out of employees' wages.
"I have not run into a company that was glad, happy or proud they did not give their workers' a raise," said Bruce Clarke, CEO of Capital Associated Industries. "They are usually upset about it, embarrassed and worried."
As the stalled economy grinds away at bottom lines, companies across the country are taking another hard look at merit increases, cost-of-living raises and performance bonuses.
Average wages fell nationwide in January and February this year, according to the Bureau of Labor Statistics.Wages had been rising since 2001 through 2008 nationwide and in North Carolina, but they fell in the first three quarters of last year nationwide, and in the first two quarters in North Carolina, BLS data show.
Hard-hit sectors
Employers typically don't get around to cutting pay or withholding raises until the company has been through a round or two of layoffs. But as profits drop, companies look at profit per employee to decide on wage increases. According to Sageworks, a Raleigh data research firm, that measure plummeted in certain industries. For instance, between 2008 and 2009, profit per employee dropped 27 percent in the construction industry, 32 percent in the manufacturing industry and 27 percent in educational services.
During the same time, the retail and health care sectors saw slight increases, but that was after declines the year before, showing their profits per employee were hit by the recession a year earlier.
Last year, WakeMed Health and Hospitals did not give its 7,800 workers a raise, saving about $12 million for the company. WakeMed also limited employees' annual incentive bonus to 1.8 percent, one-half to one-third of the typical payment in recent years. WakeMed also laid off 35 workers last year.
Tough decisions
Like many local businesses, WakeMed has not decided whether employees will get raises or bonuses this year, a decision that will not be made until June by the organization's board of directors. Most of the affected employees are nurses, therapists and technicians.
"We were all disappointed, but the fact is we were all grateful to have good jobs," WakeMed nurse Maryanne Allison said. "We were more grateful that they didn't increase our patient-to-nurse ratio."
Once set in motion, wage stagnation can be self-perpetuating mechanism. Part of what drives WakeMed's decisions are pay strategies at other health care companies.
"If the market had been giving raises, we would likely have done the same thing for fear that we would not have been competitive," saidJeanene Martin, WakeMed's senior vice president for human resources.
Last year, Progress Energy gave raises. But this year supervisors and managers - about 1,000 top people in the company - will not receive salary merit increases, spokesman Mike Hughes said. The budget pool for incentive payments for all employees, to be paid next March, will likely be cut in half, from a maximum of 7 percent to 3.5 percent of base pay at most.
At Redwoods, the typical merit pay increase had been 3 percent. The company has 90 employees and provides insurance to about 500 YMCAs and Jewish Community Centers, which were hard-hit by the recession. Last year fewer than 20 Redwoods employees received a raise, in "really deserving cases," spokeswoman M.J. Pearle said.
But companies can't freeze wages forever. Even a few years of flat pay in a row becomes untenable for most businesses that have to compete for employees as a means of competing for customers.
"At some point the pressure becomes terrific," said Clarke at CAI. "It becomes very difficult to remain competitive."
